It’s like he’s taking apart a race car, piece by piece, and putting it back together, better, and with improved parts! Capitalism can seem difficult to grasp, but De Soto, who has actually built capitalist economies in developing countries, breaks it down into six parts 1) Document the economic potential of all assets “Capital is born by representing in writing-in a title, a security, a contract, and in other such records- the most economically and socially useful qualities about the asset as opposed to the visually more striking aspects of the asset. The moment you focus your attention on the title of the house, for example, and not the house itself, you have automatically stepped from the material world into the conceptual world where capital lives” 2) Integrate Asset Documentation into one System that Anyone Can Access “The reason capitalism triumphed in the West and sputtered in the rest of the world is because most of the assets in Western nations have been integrated into one formal representational system. Developing and former communist nations have not done this. In all countries I have studied, I have never found just one legal system but dozens or even hundreds managed by all sorts of organizations. Consequently what people in those countries can do with their property is limited to the imagination of the owners and their acquaintances. In western countries where property information is standardized and universally available what owners can do with their assets benefits from the collective imagination of a larger network of people” 3) Hold People Accountable to the System “Once inside a formal property system, owners lost their anonymity. By becoming inextricably linked to real estate and business that could be easily identified and located. People who do not pay for goods or services they have consumed can be identified, charged interests penalties, fined, embargoed and have their credit ratings downgraded” 4) Make Use of the Systems Liquidity “Representations also enable the division of assets without touching them. Whereas an asset such as a factory may be an indivisible unit in the real world, in the conceptual universe of formal property representation it can be subdivided into any number of portions. Citizens of advanced nations are thus able to split most of their assets into shares, each of which can be owned by different persons, with different rights, to carry out different functions. Thanks to formal property, a single factory can be held by countless investors, who can divest themselves of their property without affecting the integrity of the physical asset. Farmers in many developing countries have no such option and must continually subdivide their farms for each generation until the parcels are too small to farm profitably, leaving the descendants with two alternatives: starving or stealing” 5) Use the System to Network the Business Community “Property’s real breakthrough is that it radically improved the flow of communications about assets and their potential. Without knowing who has the rights to what, and without an integrated legal system where the ability to enforce obligations has been transferred from extralegal groups to government, utilities would be hard pressed to deliver services properly. On what other basis could they identify subscribers, create utility subscription contracts, establish service connections and ensure access to parcels and buildings? How would they implement billing systems, meter readings, collection mechanisms, loss control, fraud control, delinquent charging procedures and enforcement services such as meter shut offs?” 6) Use the System to Encourage Trade “Although they are established to protect both the security of ownership and that of transactions, it is obvious that western systems emphasize the latter. Security is principally focused on producing trust. The Western emphasis on the security of transactions allows citizens to move large amounts of assets with very few transactions. How else can we explain that in developing and former communist nations people are still taking their pigs to market and trading them one at a time as they have done for thousands of years, whereas in the West traders take representations of their rights over pigs to the market? Traders at the Chicago Commodities Exchange for example deal through representations which give them more information about the pigs they are trading than if they could physically examine each pig. They are able to make deals for huge quantities of pigs with little concerned about the security of transactions.” I reworded the titles for simplicity but you get my drift. His driving theory is that the majority of the world poverty exists because the governments of developing nations haven’t taken these steps.